Economy grew 5.2%, some critical comments

Malaysia's GDP grew 5.2% yoy in Q3

Malaysia's economy grew at an annualised pace of 5.2 per cent in the third quarter, the central bank said on Friday, as strong domestic demand compensated for a weak export sector.

The third-quarter growth beat economists' expectations of a 4.8 percent expansion.

"Both private and public sector investment was strongly robust during the quarter. We would envisage that this will continue," Bank Negara Governor Zeti Akhtar Aziz told a news conference.

With exports faltering, much of Malaysia's growth has been driven by strong domestic demand and government spending on infrastructure projects, such as a new mass transit system for the capital Kuala Lumpur, and Iskandar, a big industrial zone near Singapore.

Prime Minister Najib Razak must call an election by April next year and is expected to stress Malaysia's robust growth as a key part of his campaign.


Above news is from Reuters on TodayOnline's website. It can't get much better, especially with the elections around the corner, or not?

However, I would like to make some critical comments:

• GDP is corrected for inflation, if inflation is understated (which, I think, is indeed the case like most countries in the world), then GDP is overstated.
• The GDP number is for the whole country, since Malaysia's population is growing fast, per capita the effect is much less.
• Malaysia has a bad GINI score, meaning that the income is very unevenly spread. It is therefore likely that lots of people do not benefit from the growth of the economy to the same degree.
• Malaysia recently went from being an oil exporter to an oil importer, this will have a clear effect in the future since oil production will further slowdown and consumption will rise.
• Huge acreage of jungle has been logged and converted to plantation land. This will give a boost to the economy, but can only be done one-time, after that the economic output of the land fluctuates with the prices of the commodity.
• And finally the country has piled up about RM 500 billion in debt (RM 100,000 for each family of 6) in an attempt to break the world record of budget deficits in a row. Surely that must have benefitted the economy, but again, this is highly unsustainable in the future. 

It would be interesting to know how much the last three factors have contributed to the GDP growth in the last 10 and what the negative effect will be in the coming 10 years.

For those people who have a problem visualizing 1 Trillion (1,000 Billion) in RM 100 notes:

 

The national debt is not yet there, but Malaysia is about half way through and if nothing changes surely 1 Trillion will be reached in the not so far future.